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Quick questions on business, investments, and personal finance.Fri, 10 Jun 2016 22:19:34 +0000en-UShourly128414133Are rich people frugal?http://ask.fitzvillafuerte.com/rich-people-frugal/
http://ask.fitzvillafuerte.com/rich-people-frugal/#respondFri, 10 Jun 2016 22:19:34 +0000http://ask.fitzvillafuerte.com/?p=1375Is it true that most rich people are frugal? If so, then does that mean one needs to be frugal to become wealthy? I guess my question, if you put it in another way is that what’s the reason why rich people are good at scrimping? Answer: How do you think they got so wealthy? […]

]]>Is it true that most rich people are frugal? If so, then does that mean one needs to be frugal to become wealthy? I guess my question, if you put it in another way is that what’s the reason why rich people are good at scrimping?

Answer:

How do you think they got so wealthy? By spending everything they made? That’s how people get poor!

You’ve probably heard the phrase that it takes money to make money. That is somewhat true, but where do you think that money comes from?

I can tell you from personal experience that the money needed to invest in things that bring in more money comes as much from saving as it does from your income.

Frugality is a huge part of how they became wealthy in the first place. Most people spend the majority of their cash on hand. Without savings, down times become far more expensive than necessary.

By forming a cushion (emergency funds etc.), saving habitually and investing extra money beyond that base, even someone from a poor background with an average income can rise above poverty to new levels of opportunities.

]]>http://ask.fitzvillafuerte.com/rich-people-frugal/feed/01375Why is it hard to make money in stock market trading?http://ask.fitzvillafuerte.com/hard-make-money-stock-market-trading/
http://ask.fitzvillafuerte.com/hard-make-money-stock-market-trading/#respondFri, 03 Jun 2016 19:31:34 +0000http://ask.fitzvillafuerte.com/?p=1370I always read about people making lots of money in stock market trading. I have studied how it works, and know more than an average person about stock market trading. But why can’t I make lots of money? Why is it hard to make money in the stock market, particularly, stock trading? Answer: The short […]

]]>I always read about people making lots of money in stock market trading. I have studied how it works, and know more than an average person about stock market trading. But why can’t I make lots of money? Why is it hard to make money in the stock market, particularly, stock trading?

Answer:

The short answer:

Because you’re still not good enough. So either you level up your skills or just invest. Stop timing the market and do something else.

The long answer:

Don’t compete with people who are better at the business than you are.

When I was a beginning physicist, I invested in the stock market. Initially I did very well; I now attribute that to luck. I began to think I knew something that others didn’t. It is easy to think you are smarter than you really are.

When things went badly for me in the market, a friend explained that I was up against professional investors. He asked me to imagine a random person competing with me in a physics question. Suppose some stock broker had to solve a physics problem, in competition with me. How would he do? The answer was obvious: the stock broker would do miserably.

But here I was investing casually in a market in which very very smart full-time professionals are trying to make money. Perhaps if I devoted myself full-time to the stock market, I could do better than they could. But if it was only part-time; if I did only casual homework, reading about companies in the newspapers rather than visiting them and making deep evaluations … then I was competing with true experts.

Some people think that the stock market is not a zero-sum game, that all can win. Yet in every trade, one person buys and the other person sells; they can’t both be winning on an objective scale.

So the true experts need to have someone to supply all the money that they make at their profession. By investing in the stock market, I was playing that role; I was one of the people who was supplying the money that would make the true professionals rich.

I decide to stop investing in things I didn’t master, and to simply work harder at something in which I knew I had talent, physics. I think this was a very important decision for me. Go with your strengths.

]]>http://ask.fitzvillafuerte.com/hard-make-money-stock-market-trading/feed/01370How should a young person invest?http://ask.fitzvillafuerte.com/young-person-invest/
http://ask.fitzvillafuerte.com/young-person-invest/#respondThu, 02 Jun 2016 22:21:45 +0000http://ask.fitzvillafuerte.com/?p=1368I’m a fresh graduate and will start my new work soon. Many say that one should invest as early as possible so I would like to do it as soon as I get my first salary. The question is, how should someone like me in my 20s invest? Answer: The most important lesson for young […]

]]>I’m a fresh graduate and will start my new work soon. Many say that one should invest as early as possible so I would like to do it as soon as I get my first salary. The question is, how should someone like me in my 20s invest?

Answer:

The most important lesson for young investors is to learn to save early in their careers. This will enable you to establish an emergency fund to weather any bumps in your career or personal life, and begin building a nest egg.

Because of compounding, money invested in your 20s is far more important in building a long-term nest egg than money invested in your 40s or 50s. Unfortunately, still many people start too late.

Beyond establishing good savings habits, the key elements of investing don’t change much over time:

Diversify broadly across and within asset classes,

Keep your total costs as low as reasonably possible,

Rebalance your portfolio over time, and

Be mindful of taxes and focus on your after-tax returns.

If you get these right then you will be well ahead of the majority of investors.

]]>http://ask.fitzvillafuerte.com/young-person-invest/feed/01368How do I motivate myself to work and become successful?http://ask.fitzvillafuerte.com/motivate-work-become-successful/
http://ask.fitzvillafuerte.com/motivate-work-become-successful/#respondWed, 01 Jun 2016 19:42:20 +0000http://ask.fitzvillafuerte.com/?p=1364I want to be successful but I find it hard to motivate myself to work. I’ve been reading a lot of blogs and positivity quotes, but they’re not really helping. So how do I really get the motivation I need to be successful? How do I work harder in life and be more motivated to […]

]]>I want to be successful but I find it hard to motivate myself to work. I’ve been reading a lot of blogs and positivity quotes, but they’re not really helping. So how do I really get the motivation I need to be successful? How do I work harder in life and be more motivated to become super successful in life?

Answer:

Oh boy. Let’s start with the DO NOT’s.

DO NOT:

Sit around reading motivational blogs all day.

Try to figure out your life’s purpose in a 10 minute, 1 hour, 1 week or even 1 month session.

Immediately cut out all comforts, luxuries or simple joys in your life

Quit your day job to randomly start a business or travel the world

Reading motivational articles is like checking your notifications on your phone. It’s like a quick dopamine shot that’s just enough to make you look for more.

Trying to figure out your life’s meaning is an overwhelming prospect. It may change, and the idea that you need to commit the next 5-10 years to some grand scheme will be so overwhelming a commitment you won’t want to start in the first place.

Cutting out luxuries all at once will give you a harsh recoil, and you’ll ask yourself why this is a life you want to live anyways if you’re giving up all the stuff you like.

Making decisions on a whim is the greatest way to regret them, even if there’s a million stories playing up its romance. I’m not saying don’t quit your job to start a business or travel the world, but let it bounce around in your head. See if it sounds as great in a month from now after you’ve considered the idea and weighed it out every day.

Now, the real question:

How do I work harder in life and be more motivated to become super successful in life?

Think about what you actually want your life to look like.
What are the characteristics you want to have? What are the experiences you want to have? Where do you want to live? Are you athletic and in what way? What sorts of things do you know about?

Reverse engineer how you get there.
Does future you know how to speak Italian? How do we get to work on speaking Italian? Are they fearless and do things like jump out of planes? How do we get you to jump out of one?

Your super successful will be different than others.
Don’t let the ultra romanticism of entrepreneurship, the playboy lifestyle, or any other concepts of living sway you towards trying to live a life you wouldn’t enjoy. You don’t have to be a billionaire, or millionaire to get what you want. You can make $20k, $50k, or $75k a year being happy with your life. It just depends on where your values lie.

Take small steps.
Rome, The Great Wall of China and Batman all weren’t built in a day. Fun fact, The Great Wall of China’s first section (a very small chunk of it) took over 20 years to build.

As we’ve seen it today, it took over 2,000 years to build, rebuild and expand the wall. You don’t become a martial arts expert, intelligent in the sciences and fearless over night.

You take the small steps you can to build habits and develop a snowball effect of improvement.

Build mental toughness.
One thing I’ve always truly admired about members of the military is their mental toughness. However, you don’t have to join the military to get better about it. You just need to expand your comfort zone. The line “It’s just discomfort.” will take you far.

You can manage to start taking cold showers, waking up earlier, walking/running farther, striking up conversations with strangers and any and all things you want to get better at by recognizing that the only thing stopping you is discomfort.

When you realize that, will you let it stop you? Will you tell your kids or friends or potential lovers “Yep, I never got this thing I wanted because I couldn’t deal with discomfort”?

Know when to slow down.
Progressive steps are like building muscle. If you are familiar with building muscle at all, sometimes you have to back off a little bit to recover. Otherwise you overload yourself, and your body begins breaking down.

Same thing happens when building willpower. At some point, you’ll begin to wear down, get tired, headaches, your body telling you to quit. You’ll want to just give up and play video games or watch TV all weekend. So treat yourself to a bit of it, but just don’t give up. Rest, recover, re-attempt.

The 40 percent rule.
With all that said about recovery, you must understand this rule. There was a video where a man talked about an ultra marathon he did with his friends, where they all ran different legs of a 100 mile stretch.

There was a retired Navy SEAL who did the entire thing on his own. The SEAL had swollen ankles and broken bones in his feet when it was over. Afterwards he approached the SEAL and asked him how he did that and if he’d train him. Later on, they met at the gym and the SEAL told him to do as many pull-ups as he could.

The first time he did 8, the SEAL told him to again and he did 6, one more time and he eked out 4. The SEAL then told him they wouldn’t leave until he did 100 more. He didn’t think they could, but one by one and hours later, he had managed 100.

He told him “Whenever you think you’re done and entirely ready to give out, you’re only 40% of the way there”. You can be pushed a lot further than you realize. So don’t break yourself every day, but push to 50% and you will not break, and your capacity for difficulty will expand.

]]>http://ask.fitzvillafuerte.com/motivate-work-become-successful/feed/01364How should one invest in a bear market?http://ask.fitzvillafuerte.com/one-invest-bear-market/
http://ask.fitzvillafuerte.com/one-invest-bear-market/#respondMon, 30 May 2016 18:00:04 +0000http://ask.fitzvillafuerte.com/?p=1359The stock market is falling, and I’m afraid to invest because everything is going down. What’s the strategy when it’s a bear market? Should I avoid investing? Or should I buy now because prices are low? Answer: This is a superb question because there are a lot of misconceptions out there about true value investing […]

]]>The stock market is falling, and I’m afraid to invest because everything is going down. What’s the strategy when it’s a bear market? Should I avoid investing? Or should I buy now because prices are low?

Answer:

This is a superb question because there are a lot of misconceptions out there about true value investing and how to prudently navigate a bear market.

The biggest mistake that “would-be” value investors make is oversimplifying the words of Warren Buffett, Howard Marks, and the like, and thinking that investing in a bear market is as simple as aggressively going long anything and everything that screens cheap.

It is a mistake to think that a bear market makes investments cheap. Rather, a bear market makes investments mispriced.

Don’t get me wrong – in many instances bear markets do precipitate dislocations to the downside, and some of the greatest investment opportunities arise from companies for which the market has an unwarrantedly negative view.

But identifying these opportunities is difficult because there are often just as many mispricings to the upside as well. The market generally isn’t stupid, and for the vast majority of investments that have declined 90% in price, there is a damn good reason for that decline – most of them are actually worth zero.

As an investor, my job is pretty simple – to distinguish which mispricings are which. The reason I like bear markets isn’t because it allows me to take the shotgun approach of investing in everything that screens cheap.

Most of the time this approach ends in disaster (remember that just because something has fallen by 90% doesn’t mean that it can’t fall by another 90%). Rather, it’s because irrationality peaks in bear markets and the market becomes less efficient.

Most of the time I consider myself lucky if I can find 2 or 3 compelling investment opportunities per year. In a bear market, these dislocations just tend to be more plentiful.

So how should one invest in a bear market? With caution. Don’t view it as a once in a lifetime sale. Rather, imagine that you went to the grocery market and some incompetent employee shifted all of the price tags around to different products.

It doesn’t mean that you should automatically go around and buy all the produce. Rather, just buy the ones where intrinsic value is very clearly above the sticker price.

]]>http://ask.fitzvillafuerte.com/one-invest-bear-market/feed/01359How can I save more money?http://ask.fitzvillafuerte.com/can-save-money/
http://ask.fitzvillafuerte.com/can-save-money/#respondSat, 21 May 2016 21:11:43 +0000http://ask.fitzvillafuerte.com/?p=1356I want to save more money. I’m already doing the pay yourself first strategy, and trying to spend less eating out and bringing meals to work that I cooked at home. But I’m looking for more ways. Answer: First, don’t look at it as deprivation. Instead, look for all the amazing things you can do […]

]]>I want to save more money. I’m already doing the pay yourself first strategy, and trying to spend less eating out and bringing meals to work that I cooked at home. But I’m looking for more ways.

Answer:

First, don’t look at it as deprivation. Instead, look for all the amazing things you can do with little or no money. Or, see it as a game to save money, and have fun doing it. If it’s a chore, either you’ll never get there, or you’ll hate where you’re going, every step of the way.

You don’t have to figure out everything all at once. Start with the easy stuff. You can make coffee at home or start carrying your own water in a container you probably already have around. Instant savings, no skill required.

Use abundant, free information for all it’s worth. If you asked this question, you’re online. With any luck, you also have a good public library near your home. There’s almost nothing that can’t be done with a little determination and one or both of these tickets to free access to the world’s knowledge.

I make extensive use of a couple local library cards and a home Internet connection. I’d have a tough time putting a value on either. Certainly I’ve saved the cost of hundreds of books over the years, some better than others, and saved on entertainment (see below). I’ve also learned a ton about subjects ranging from managing my personal finances and buying a house, to maintaining my house, bike, car, etc. I’ve learned productivity and creativity hacks, discovered my interests, upgraded my professional skills, applied for jobs and raises, and dealt with a range of personal business.

Find entertainment that saves or even earns money. First and foremost, find better things to do for entertainment than shop. If nothing else, shopping really isn’t that entertaining.

I learned to crochet a few years back, after inheriting hooks from my grandmother. Yarn and thread are abundant and cheap at thrift stores and garage sales. A few bucks worth of string can keep me amused for more hours than one rented movie, and often results in a useful object, garment, or gift that saves money.

I also bike to work, weather and hours-of-daylight permitting. I happily bike past a gym I don’t need to belong to, and over and around sluggish traffic I don’t have to sit in.

Do it yourself. I enjoy the challenge of learning new skills and the satisfaction of accomplishing tasks. Among the things I’ve gotten pretty good at: basic plumbing, interior painting, sewing, bike maintenance, baking, cooking. I’m still working on gardening, and I think I’d like to learn and improve basic construction skills (I’d like to build a deck or patio and repair some fences) and maybe learn about building PCs. Here again, I see it as both entertainment and expense avoidance. Occasionally also exercise.

Many things that save money are also kinder to the environment.

Reduce waste. The things you don’t buy will always be cheaper than the best bargains. Take a glance in your trash cans, sometime before you take them out. That’s waste in its truest sense. Are there single-use disposable items in there? Would it be so tough to avoid some of them? Substitute reusable things for disposable things whenever you see the opportunity.

I aim for a waste-free lunch box, too, and, besides not having to fiddle with plastic forks breaking, I think I eat better as a result, because I don’t take boxed dinners or get takeout very often. Instead, I make up a largish batch of something (soup, casserole, stir-fry, etc.) once or twice a week. And since I’d rather avoid waste at home, too, I buy mostly fresh, whole, simple ingredients. I even bring home peels, cores, and stems to compost.

Definitely take a good look at what sorts of things you sell at a garage sale or haul off to charity. These are also waste. Why did you buy that stuff? Could you have done without it in the first place? Know your tastes and avoid needless purchases next time. (If you’ve lost weight, or kids are outgrowing stuff, congratulations.)

Save energy and water. The most energy efficient appliance is one that is turned off when not in use. Costs nothing. No upgrade needed. No particular sacrifice, either. There’s loads written on this subject already, but your utility bill is one of those recurring expenses that adds up big, over time. Take a look at it, invoke your library card or search engine if you need help figuring out ways to save, and challenge yourself to do a little better next month. Oh, and try air-drying your clothes and dishes. It’s the cheapest way to start taking advantage of solar energy.

And last but certainly not least:

Value yourself, your family, your friends, and your community, not your money. It will save you all sorts of dough if you don’t have to have the latest-and-greatest, or the shiniest car on the block, or otherwise feel the need to spend money just for the sake of showing you’ve got it.

There are unselfish reasons, too, for saving money, such as being kinder to the environment, and having the resources (monetary or knowledge) to help others rather than to rely on them. Find your reasons and you need not struggle.

]]>http://ask.fitzvillafuerte.com/can-save-money/feed/01356What’s a simple business to put up?http://ask.fitzvillafuerte.com/whats-simple-business-put/
http://ask.fitzvillafuerte.com/whats-simple-business-put/#respondThu, 19 May 2016 17:24:09 +0000http://ask.fitzvillafuerte.com/?p=1348I just want to earn something extra. So I need a simple business that I can put up. Nothing permanent, just something to give myself more cashflow for a few months. Thank you. Answer: It depends on what you can do, especially your skills. But here’s a few suggestions: 1. Rent extra space in your […]

]]>I just want to earn something extra. So I need a simple business that I can put up. Nothing permanent, just something to give myself more cashflow for a few months. Thank you.

Answer:

It depends on what you can do, especially your skills. But here’s a few suggestions:

1. Rent extra space in your home: If you live in one of the tourist cities and got some extra space in your home start renting on Airbnb

2. Babysitting: Love kids? You can generate some extra cash on Friday and Saturday evenings. Young parents are usually always looking for someone to take care of their kids on Friday or Saturday evenings to have some quality time with their significant other.

3. Housecleaning: Some people don’t have time to clean their homes and cleaning doesn’t require any qualification. Offer the service on several online sites or social media.

4. Tutoring: If you have patience and did major in one of the subjects you can always reach out to parents and offer tutoring service.